How does the loanable funds market translate savings into investment and what adjusts to bring the market to equilibrium? A. The savings provide the supply of loanable funds, while investment is the demand for loanable funds. While financial markets provide a means of transferring savings into investment, it is the inflation rate that changes to bring the market into equilibrium. B. The investments provide the supply of loanable funds, while saving is the demand for loanable funds. While financial markets provide a means of transferring savings into investment, it is the inflation rate that changes to bring the market into equilibrium C. The savings provide the supply of loanable funds, while investment is the demand for loanable funds. While financial markets provide a means of transferring savings into investment, it is the interest rate that changes to bring the market into equilibrium D. The investments provide the supply of loanable funds, while saving is the demand for loanable funds. While financial markets provide a means of transferring savings into investment, it is the interest rate that changes to bring the market into equilibrium.
Answers
Answer:The answer is C
Explanation:
The financial market is a market where short term and long term loan can be obtained, it comprises of the money market and the capital market. The money market provides short term finance to lenders which lenders can use for up to two years before repayment. The money market consist of the commercial banks, Discount houses, merchant banks, finance companies. While the capital market provides long term loans to lenders which lenders can then use for more than two years before repayment. The capital market consist of issuing houses,insurance companies, mortgage bank,the stock exchange.
The simple market for loan able funds is made up of the surplus economic unit which comprises of the savers of funds,the investors as well as the purchaser or buyers of financial claims( assets) while the deficit economic unit is made up of issuers of financial claim and borrowers. This simple market for loan able funds works through process by which the participants in the market mobilized fund from the surplus economic unit to the deficit economic unit for the purpose of investment in the economy. When a borrower needed funds such borrowers will approach a financial institutions to borrow, the financial institutions will lend the money to the borrower from the savings made by the depositors into their account and the financial institutions will charge an interest rate on the loan lend out to the borrowers. The borrowers will then use the loan to invest in the economy.
Final answer:
In the loanable funds market, savings make the supply, and investment provides the demand. These savings are transferred into investments through financial markets. The interest rate adjusts to maintain equilibrium in the loanable funds market.
Explanation:
The loanable funds market functions to convert savings into investments. In this market, savings provide the supply of loanable funds while investment constitutes the demand. Financial markets play an instrumental role in facilitating this transfer. One fundamental principle guiding these interactions is that equilibrium in the market is achieved predominantly through the adjustment of the interest rate. In essence, it is ultimately the interest rate that adapts in response to shifts in supply (savings) and demand (investment) and helps achieve market equilibrium.
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Related Questions
At the beginning of the year, Vendors, Inc., had owners' equity of $50,435. During the year, net income was $6,675 and the company paid dividends of $4,535. The company also repurchased $8,785 in equity. What was the cash flow to stockholders for the year?
Brodrick Company expects to produce 21,000 units for the year ending December 31. A flexible budget for 21,000 units of production reflects sales of $504,000; variable costs of $63,000; and fixed costs of $141,000. Assume that actual sales for the year are $595,600 (26,900 units), actual variable costs for the year are $114,000, and actual fixed costs for the year are $133,000. Prepare a flexible budget performance report for the year.
Almost overnight, several police officers, all members of the police force of the growing suburb of mayberry, called in sick. as the dispatcher took those calls, one right after the other, she speculated that there could be more to this story than she was hearing. in fact, she thought it might be related to the emotional banter she heard the night before in the locker room as several members of the force were leaving their shifts. the group was not happy with the recent changes in scheduling, the excessive overtime hours, and, management's reluctance to begin negotiations on a new benefits package. she heard one officer saying, "it's time for a mental health day!" although it is illegal for police to strike, what the police dispatcher was witnessing may have been ______.
Should the home country be "large" relative to the world, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms-of-trade effect exceeds the sum of the:_________a. revenue effect plus redistribution effect. b. protective effect plus revenue effect. c. consumption effect plus redistribution effect. d. production distortion effect plus consumption distortion effect. e. None of the above.
Answers
Answers
Answer:
The amount that could be justified now for the purchase of this piece of equipment is $73,747.41.
Explanation:
Note: This question is not complete as all the data in it are omitted. A complete question is therefore provided before answering the question as follows:
It is estimated that a certain piece of equipment can save $22,000 per year in labor and materials cost. The equipment has an expected life of five years and no market value. If the company must earn a 15% annual return on such investments, how much could be justified now for the purchase of this piece of equipment?
The explanation to the answer is now given as follows:
To calculate this, the formula for calculating the present value of an ordinary annuity is used as follows:
PV = P * [{1 - [1 / (1 + r)]^n} / r] …………………………………. (1)
Where;
PV = Present value of the amount to justify the equipment purchase = ?
P = yearly savings in labor and materials costs = $22,000
r = annual return rate = 15% = 0.15
n = Equipment has an expected life = 5
Substitute the values into equation (1) to have:
PV = $22,000 * [{1 - [1 / (1 + 0.15)]^5} / 0.15]
PV = $22,000 * [{1 - [1 / 1.15]^5} / 0.15]
PV = $22,000 * [{1 - 0.869565217391304^5} / 0.15]
PV = $22,000 * [{1 - 0.497176735298289} / 0.15]
PV = $22,000 * [0.502823264701711 / 0.15]
PV = $22,000 * 3.35215509801141
PV = $73,747.41
Therefore, the amount that could be justified now for the purchase of this piece of equipment is $73,747.41.
Final answer:
The question asks about the amount a company can justify spending on equipment, based on expected savings and a required rate of return. This requires understanding the concept of Present Value in financial calculations, using the formula PV = CF / (1 + r.
Explanation:
The problem is related to the concept of Present Value in finance. Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return. In this scenario, the stream of cash flows is the annual savings in labor and materials costs due to the equipment. The return rate is the annual return the company requires on such investments.
To calculate the present value, use the formula:
PV = CF / (1 + r
Where:
PV is the Present Value
CF is the annual savings (Cash flow)
r is the annual return rate
n is the expected life of the equipment.
Plug in the given values into this formula to get the amount the company could justify for the purchase of this equipment. Do remember, the rate (r) is expressed in decimal, so if the annual return is say, 5%, use 0.05 in the formula.
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For each of the following costs incurred at Northwest Hospital, indicate whether it would most likely be a direct cost or an indirect cost of the specified cost object by listing the number and a "D" for direct or an "I" for indirect. For example: 1D, 2D, etc.
a. The wages of pediatric nurses / The pediatric department
b. Prescription drugs / A particular patient
c. Heating the hospital / The pediatric patient
d. The salary of the head of pediatrics / The pediatric patient
e. The salary of the head of pediatrics / The particular pediatric patient
f. Hospital chaplain's salary / A particular patient
g. Lab tests by outside contractor / A particular patient
h. Lab tests by outside contractor / A particular department
Answers
Answer:
Northwest Hospital
aD
bD
cI
dI
eI
fI
gD
hD
Explanation:
Direct costs are costs that are directly traceable to the production of goods and services and can be identified with a unit of production. While direct costs are usually variable, some direct costs can be fixed.
Indirect costs are costs that support the operation of the company. They cannot be traced to any unit of production. Similarly, some indirect costs are variable while others are fixed.
Answers
Answer:
1/2 ton of wheat per ton of corn
Explanation:
Home produces 0.5 ton of corn or 1 ton of wheat with a day of labor:
Opportunity cost of producing a ton of corn = (1 ÷ 0.5)
= 2 tons of wheat
Opportunity cost of producing a ton of Wheat = (0.5 ÷ 1)
= 0.5 tons of corn
Foreign produces 1 ton of corn and 0.5 ton of wheat:
Opportunity cost of producing a ton of corn = (0.5 ÷ 1)
= 0.5 tons of wheat
Opportunity cost of producing a ton of Wheat = (1 ÷ 0.5)
= 2 tons of corn
Therefore,
Foreign has a comparative advantage in producing corn because of lower opportunity cost and Home has a comparative advantage in producing wheat.
So, home country will be importing corn from foreign. Hence, if the international price will be 0.5 tons of wheat per ton of corn then the home country will get the largest gains from the trade because it is willing to sacrifice 2 tons of wheat for a ton of corn.
2. Interest owed on a loan but not paid or recorded (accrual) is $275.
3. There was no beginning balance of supplies and $550 of office supplies were purchased during the period. At the end of the period $100 of supplies were on hand.
4. Legal service revenues of $4,000 were collected in advance. By year-end $900 was still unearned.
5. Salaries incurred by year end but not yet paid or recorded amounted to $900.
Answers
Answer:
1. Debit Depreciation expense $1,340
Credit Accumulated depreciation $1,340
2. Debit Interest expense $275
Credit Accrued Interest $275
3. Debit Supplies expense $450
Credit Supplies Account $450
4. Debit Unearned Service revenue $3,100
Credit Service revenue $3,100
5. Debit Salaries expense $900
Credit Accrued Salaries $900
Explanation:
Depreciation is the systematic allocation of the cost of an asset to the income statement over the estimated useful life of that asset.
It is determined as the depreciable value of the asset over the estimated useful life of the asset where the depreciable value is the difference between the cost and salvage value of the asset
Mathematically,
Depreciation = (Cost - Salvage value)/Estimated useful life
It is recorded by debiting depreciation and crediting accumulated depreciation.
When interest is incurred as an expense but yet to be paid, it will be accrued for by Debiting Interest expense and crediting accrued Interest. The same applies to salaries incurred but yet to be paid.
When Supplies is purchased, Debit supplies and credit Cash/Accounts payable. As Supplies are used up, debit supplies expense (with the amount used) and Credit Supplies account.
Amount of supplies used up = $550 - $100
= $450
When a fee is received in advance for a service yet to be rendered, the revenue for such fee is said to be unearned. The entries required are
Debit Cash account and Credit Unearned fees or deferred revenue.
As the service is performed and the revenue is earned, debit Unearned fees and credit revenue.
Earned revenue = $4,000 - $900
= $3,100
Answers
Answer:
1. expanded
2. effective workforce
Explanation:
The widespread acceptance that bacteria causes diseases helped lead to a public health movement in the late nineteenth and early twentieth centuries. This movement eventually brought sewers, clean drinking water, and garbage removal to all U.S. cities.
The public health movement in the United States in the late nineteenth and early twentieth centuries was like a technological advance to the country's production possibilities, since both EXPANDED the economy's productive capacity, the former by increasing the nation's EFFECTIVE WORKFORCE .